Salesforce: Raymond James Ups to Strong Buy on Customer Trends

By Tiernan Ray

Raymond James‘s Terry Tillman this morning raised his rating on shares of Salesforce.com (CRM) to Strong Buy from Outperform, and raised his price target to $64 from $55, after getting positive vibes from a “customer company tour” hosted by Salesforce in Atlanta last week, where Tillman says he “spoke with a variety of contacts, including partners and customers.”

Perkins raised his estimate for this year ending in January to $4.02 billion in revenue and a 42-cent net loss from a prior $4.01 billion and a 44-cent loss, and raised his estimate for next year to $5.3 billion and a 17-cent net loss per share from $5.28 billion and a 19-cent loss.

The rise in estimates comes from “an increase in core CRM revenue and an aggressive ExactTarget revenue assumption of ~$400 million.”

Tillman details,

The revenue upside flows through to slightly higher non-GAAP profits with in-line cash flow. Our FY15/CY14 revenue estimate now assumes organic growth of 26%, which could prove conservative. We believe solid ongoing growth in the core Sales Cloud business, incrementally stimulated by enterprise traction, ongoing Service Cloud ramp, and increased platform revenue contribution, all present organic upside catalysts. With the ExactTarget business, we believe its own recent ramp in growth investments and revenue synergy opportunities could significantly accelerate the run rate of the business exiting FY15, leading to additional upside in our model

Among Tillman’s observations from the conference were that the company is seeing “significant expansion” into areas such as business-to-consumer, or “B2C,” with “Coca Cola Enterprises now running much of its business on salesforce.com.” He also thinks thinks the company is creeping up on RightNow Technologies (acquired by Oracle (ORCL)): “Service Cloud continues to ramp with one of salesforce.com’s top-five global partners indicating significant call center implementations are occurring with one example being a rip and replace of RightNow Technologies at Staples.”

Another positive is the IPO last week of Salesforce’s platform partner, Veeva Systems (VEEV), which has “shed light on a highly successful Force.com platform partners,” and the platform business for Salesforce “is ramping impressively on the independent software front with real direct revenue attached.”

As far as ExactTarget, “We believe the ExactTarget business has maintained momentum in the large enterprise side (e.g. Citibank, Home Depot, Sony) and early pockets of field sales collaboration are opening up incremental revenue opportunities.”

“Email marking, mobile messaging, and Pardot B2B marketing automation were commonly cited among salesforce.com customers and prospects at the Atlanta event as areas of interest.”

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.